“When I started at LKM it was a total metals business,” explains managing director Tony Hughes.
That was around four years ago. Now the business, which serves the commercial and industrial sectors, has an 85/15 split between metals and other waste streams. Its ambition is for this to become a 50/50 split and reduce its reliance on metals.
Hughes spent 20-odd years in the scrap metal sector and five years as a regional general manager for Sita, which gave him an understanding of a range of waste commodities. He says: “When I came to work at LKM and looked at what they were doing, they had trucks, they had bins and they had sites – what they didn’t have was any outlets for waste.”
Hughes started talking to people and found that the business could source uPVC window frames: “There was some recycling going on in the UK for window frames, but the people I spoke to were literally throwing it in their waste bins – they were paying to get rid of them. At that point we could afford to pay around £7 a tonne for that material and still handle it, process it, move it on and make a nice margin.
“So it opened up our eyes that there were materials in the waste stream that have a value, that we could handle and have a margin from.”
So LKM started collecting and handling uPVC, as well as wood, glass, paper, cardboard and general waste. One of its first uPVC customers was a leading regional supplier of double glazing, and LKM was able to save the business around £2,500 a month in disposal costs, while increasing its recycling and reducing its reliance on landfill.
“We obviously had some nice margins in the middle of it, so it was a win-win situation,” says Hughes. Since then, LKM has started working with other window companies. And at the same time as it expanded the range of materials it collects, it has also been able to offer a total waste management service for these businesses, as well as to new and existing customers.
“If you go back 18 months or two years, metal was valued about £150 a tonne. So all our customers had a lovely bit of revenue from their metals and, obviously, they also had a waste cost going through their business,” he says.
“Now metals are worth only about £30 or £50 a tonne which is a lot, lot lower, so we consider it is now falling into the waste stream.
“So we go along and offer a total waste management solution incorporating their metals, general waste, paper, cardboard and wood. We try to help customers increase their recycling and save them some money along the way – and we get more value out of those customers.”
Does he believe that metals-only businesses have had their day? “There are different sizes of metal company. You have got the likes of EMR – they are huge and even they are diversifying into shredder waste processing, energy recovery from shredder waste.
“Below them, you get to the scale of company like us [LKM has 50 staff]. If our size of company stays just in the metals industry, we consider they are standing still. And if you are standing still, you are going backwards – because there are fewer tonnes around nowadays and less margin.
“Then you have the one- or two-man bands and we consider that, in the next 12-18 months, they will disappear. We know what the value of metal is and what the margins are, we know how many tonnes they are doing and you think ‘that doesn’t stack up, you cannot survive on that’.”
Hughes says the total waste management offer gives his business a steadier, long-term revenue margin because customers sign up to 12-month contracts and a good service rather than to the short-term price focus of the metals industry. Customer service and focus is something that LKM prides itself on.
While the shift to a total waste management service has involved a lot of re-education within the company, it supports aspirations to double turnover and profits in the next five years. The company’s immediate focus is on growing its own capacity to handle uPVC because it would like to start processing the material itself and gain more value from it rather than simply handling it and moving it on.
For what was a traditional scrap merchant, LKM has undergone significant change. As Hughes says: “It is a different business today to what it was five years ago.”